Question to the HM Treasury:

To ask the Chancellor of the Exchequer, pursuant to his Answer of 17 October 2024 to Question 8846 on Further Education: VAT, if she will set out the reasons why further education colleges are unable to recover the VAT they have incurred on their expenditure.

Section 33 of the VAT Act 1994 provides a scheme that allows local authorities (LAs) and similar public bodies to refunds of VAT equal to that incurred on purchases of goods and services relating to their statutory non-business activities. The scheme was introduced to prevent VAT falling as a burden on local taxation. As funding for maintained schools is channelled via LAs, maintained schools benefit from the scheme. Section 33B, which allows academies to recover the VAT they pay, was introduced in April 2011 to ensure that academies were not disincentivised from leaving LA control.

FE colleges and sixth forms are not eligible for VAT refunds as they do not fit the objectives of either Section 33 or Section 33B (protecting local taxation or encouraging academisation). Almost all sixth form colleges (the second most common type of FE college) have the choice to restructure as 16-19 academies, enabling the recovery of VAT under the refund scheme; however, many choose not to.